December 29, 2016
Chicago tax rates begin to catch up with the burbs

GREG HINZ ON POLITICS

Chicago property owners still are getting a relatively good deal compared to their counterparts in the suburbs, according to a new report from the Civic Federation.

But the spread is narrowing, especially for owners of commercial property, the government watchdog group says in its annual look at the “real” size of tax bills. And a good chunk of the gap could disappear when huge property tax hikes pushed through by Mayor Rahm Emanuel finally are reflected in upcoming data.

The report, which combines state and local data to compile the estimated effective property tax paid in the Chicago area as a percentage of a property’s market value, finds that Chicago residential owners have the lowest effective tax rate of 12 Cook County communities studied at 1.56 percent, and lower rates than in any of the collar counties.

For instance, while a Chicago homeowner paid an average 1.56 percent of what their home was worth in tax year 2014, the latest year available for study, someone in Glenview paid 1.79 percent, Arlington Heights 2.52 percent and Chicago Heights 5.59 percent.

Chicago office building owners on average paid less than their counterparts in suburban Cook County—4.18 percent compared to 7.3 percent in Schaumburg, for instance. But the rate in the city was higher than almost everywhere in the collar counties.

The reason: Commercial property in Cook County is assessed at a higher rate than owner-occupied residential buildings.

Rates on industrial properties were not available because too few sales occurred last year for valid comparisons, the federation said.

More significant may be the trend of what’s happened over the past decade.

The effective tax rate on residential property in Chicago rose 28.2 percent over the past decade, generally lower than in the suburbs. Chicago’s advantage lessened last year. But the effective tax rate on Chicago commercial property jumped three times as much in the decade: 76.4 percent. That puts Chicago about in the middle compared to the rest of Cook County, but well ahead of growth in most of the collar counties.

That shift could accelerate beginning with the 2015 tax year, paid this year. That’s when the first wave of Emanuel’s pension-driven property tax hikes hits, $423 million for police and fire retirement systems alone.

That ramp-up should be of concern, but how much won’t be clear until new property values are available, Civic Federation Research Director Sarah Wetmore noted. “When you see a large increase relative to others, it does enter into competitiveness,” she said. “Downtown still has other assets going for it. . . .(But) the gap is closing more than it was before.”

Overall, the city’s median level of assessment (the ratio of tax value to market value) dropped last year by 6 percent. But that may be largely due to the fact that Chicago was reassessed for tax purposes last year, something that occurs every three years.

Among other findings, Harvey has the highest effective tax rate among communities studied by the federation, 7.71 percent for residential and a whopping 19.2 percent for commercial properties.

Also, every community studied, either in Cook County or the collar counties, had an increase in overall effective tax rates over the past decade, likely driven by the fact that government agencies asked for the same or more in taxes as property values declined. Those rises reversed a bit last year with the recovering economy, but it’s far from certain that trend will continue.

Such figures help explain why Gov. Bruce Rauner has included a mandatory statewide property tax freeze on his short list of demands in Springfield over a new state budget.